This Diwali, be credit smart while buying a smartphone. Here's how

Every year during festive seasons, banks focus on retail segment to attract buyers with the best offers and heavy discounts. During Diwali, banks create a host of offerings on loans for auto, house and consumer durables. Smartphones are one such option that makes up a substantial part of the consumer durable segment. The high-end smartphone launches are some of the most coveted yearly events, the launch of some are just a few days away. Early adopters in India are already looking forward to it.

In marketing terms, early adopters play a vital role in consuming technology. These are a segment of the population who are the ‘first buyers’ of the product and can serve as product testers, providing feedback and suggestions for improvement. If you have ever seen queues in front of a showroom before a launch, then you were looking at some early adopters. According to a Nielsen Survey, last year in India the percentage of early adopters was as high as 28% of all buyers, fifth highest in the world.

Millennials are a majority in the early adopter segment. A student or a young professional may not have a disposable income to buy these high-end gadgets but this should not weaken their festive spirits. There are several ways to finance your expensive smartphone. Having a credit card here could help you avail the option of EMIs which can be paid with monthly installments.

You also have the option of going for a consumer durable loan at the electronic store from where you’re making the purchase. Most large and small electronic stores have finance company representatives who can provide loans instantly to buyers at point of purchase, near the counter. However, in order to avail this loan you must understand the criteria for approval of these loans.

So, the groundwork you should do if you are planning to buy a high end smartphone on finance:
• Documents- If you are using your credit card, to apply for a loan, you would require an address proof such as an electricity bill, a cancelled cheque and an identification proof such as a PAN card.

• If you are choosing a consumer durable loan or personal loan to fund this purchase then you will have to show an income proof and provide the lender with salary slips of the last three months and bank statements of the last four months.

• T&C and interest rates- Interest rates and processing fee on consumer durable may be 0%.

• CIBIL Score and Report- The finance company representative at the store will check your CIBIL Score before approving your loan. CIBIL data shows that 80% of new credit is sanctioned to borrowers with a credit score of 750 and above. Higher the credit score, the better are the chances of your loan getting sanctioned. So it will be a wise idea to monitor your CIBIL Report and Score before you apply for this loan.

If you are new to credit, you must work towards building a healthy credit history as your future requirement of finance depends on how prudent you are about repaying loans or EMIs on time. It is very crucial for an individual to ensure that he/she does not delay or falter on paying the dues.

CIBIL Score and report provide a testimony of your financial discipline to banks and financial institutions for approval of your loan or credit card application. A healthy CIBIL Report and Score indicate that you are managing your loans and credit relationships well establishing your financial discipline.

If you manage your loans and credit relationships well and are financially stable, the future benefits for these are tangible and rewarding. Lately, a few banks have started credit score based lending rate to retail loan seekers. It means an individual with a higher CIBIL score may get a loan at lower rate of interest compared to someone with a lesser CIBIL score. Your credit behaviour can be a major enabler for cheaper and easier access to finance in times to come.

(The article is authored by Harshala Chandorkar, COO, TransUnion CIBIL)